India’s Madras Fertilizer revival plan stalled by Iran co-promoter

12 September 2012 08:53  [Source: ICIS news]

KOLKATA (ICIS)--Plans to revive debt-ridden Madras Fertilizer Ltd (MFL) are being stalled as its Iranian stakeholder opposes a loan-to-equity scheme, in which the Indian government will end up taking a bigger stake in the company, a government official from India said on Wednesday.

Naftiran Intertrade Ltd, an affiliate of National Iranian Oil Company that holds a 25.77% stake in MFL, has posed objections to the plan, the official from India’s Department of Fertilizer said.

“The Indian government has offered conversion of MFL’s existing loan and interest liabilities of $70m (€55m) into equity as part of revival of the company, but the resultant increase in Indian government’s equity stake in the company has been opposed by Naftiran,” the official said.

According to the Department of Fertilizer, the Indian government currently holds a majority stake of 59.50% in MFL.

“MFL had drawn up plans to switch feedstock to natural gas to reduce costs and resume production of complex NPK [nitrogen phosphorous potassium] fertilizer and the project was scheduled for completion by end-2013,” the official said.

Production at the company’s 2,250 tonnes/day NPK facility has been halted since 2008-2009.

“But the project was dependent on reduction of loan and interest liability of the loss-making MFL and with a co-promoter opposing the loan conversion, the scheduled completion would be delayed,” he added.

As per the Sick Industries Companies Act, MFL was referred to the Board for Industrial and Financial Reconstruction (BIFR) in 2009. The company had incurred a loss of $91m in the year ending 31 March 2012.

According to filing made to BIFR, MFL had cited antiquated technology and plant, high cost of feedstock and high energy consumption as primary causes for posting losses.

To meet it feedstock requirement of 1.54 mmscmd (million metric standard cubic metres per day) of natural gas, the company is negotiating for supplies from Reliance Industries offshore Krishna Godavari (KG) D6 basin.

But as contingency plans, MFL is also exploring options of sourcing natural gas from Indian Oil Corp’s (IOC) proposed liquefied natural gas (LNG) terminal at Ennore, near Chennai and Gail India’s LNG terminal at Kochi, both in southern India.

In Manali, which is located 20 kilometres from Chennai, MFL’s urea plant with a 486,750 tonne/year capacity is currently running at full capacity.

($1 = €0.78)

By: Ajoy K Das
+65 6780 4359

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